There is still a distance in time to go before it is more unlikely for the media to be negative about the GSEs past and all positive on the GSEs present and future.
Net positive will be complete at the end of the 4th quarter and with the GSE earnings announcement. From then there can be no negative speaking about bailout money without appearing as an ill informed and biased.
In the same time frame, motions and cross motions will be filed by the US Treasury and FHFA and the Plaintiffs. These will be made available for public consumption.
The motion for dismissal by the US Government in the Fairholme's takings case was a serious misstep. The motion was not positively received and it was pummeled into the ground and quickly silenced. As mentioned previously, the motion contained a misleading and materially false narrative about the Third Amendment, totally disregarded the temporary nature of the conservatorship and ignored the statutory provisions in HERA that clearly aim to protect the private shareholders and financial conditions of the companies for later release from the conservatorships. The financial media and industry professionals did not try to sugar coat or spin the US Government's motion against the GSEs.
If such legal missteps by the Government continue, and if the Plaintiffs' cross motions prove to be David-like against a Government Goliath, these will heighten the positivity now growing around the GSEs at December's end and through January 2014.
By January's end, Watt will have moved to form his team. Watt will designate the FHFA Deputy Director and that will be news. Watt will seat DeMarco somewhere inside of or outside the FHFA. That will be news as well.
Watt at some time in the near future most likely will make an announcement of his plans for the GSEs and housing finance industry if and when he can get out from the FHFA's staff loyalty to DeMarco and/or to his plans that are still in place. Watt's moves will be closely watched and scrutinized and opinions will be spun quickly.
Watt is a wild card. He has a five year term that exceeds the President's final 3 years in office and so how independent he will be as a head of an independent federal agency is unknown. There is an assumption that he will tow the President's and Democratic Party line. However, having such great power and gradually realizing it may influence Watt to act in unexpected ways.
So, by mid February, and as the campaigns wind up for the November 2014 elections(35 Senate seats and all 435 House seats), we will see a slow down in GSE efforts at housing finance reform legislation.
However, Tim Johnson is retiring and will not campaign in 2014 and Crapo is not up for re-election until 2016. So we may see a Johnson-Crapo housing finance reform bill by mid February and possibly before then.
Also, will the Senate still have a Democratic majority in January 2015?
So a change in the current neutral to positive positive GSE news flow may be altered in some way (clear, muddy, etc.) depending on how that draft of a bill treats the GSEs and down the line on what parties are in control of the Senate and the House after the 2014 elections.
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